Skip to main content

Contrary to popular belief, at least since the Korean War US Federal Government spending [including welfare and Social Security], along with budget deficits and the national debt, generally increased during Republican Administrations [except during the Eisenhower Administration] and usually fell during Democratic ones.

The reasons for this vary and are often highly political. For example, during their periods in power Republicans generally lower certain taxes [most often on the wealthy and for rent seeking activities], while increasing governmental expenditures [usually by large increases in defense spending or in expanding direct transfers of federal revenue to states]. This at times produces a temporary appearance of prosperity, but over the long run the lowering of revenue and the maintenance or increase in expenditures leads inevitably to larger deficits and debts especially during those periods of prosperity when debts and deficits should be reduced.

        Democrats, however, inheriting these increased deficits and debts, as soon as they assume power usually are assaulted by criticism from the Party that created the debts and deficits, that the promised expenditures upon which the Democrats ran for office would further increase those debt obligations. As a result they generally begin their administrations attempting to increase revenue [usually from those who benefitted from the other Party's largess] or by cutting programs, usually those favored by the other Party [like Defense]. Proving once again that Democrats are wusses.

        In any event, that's not the problem. There is plenty of tax money received by the federal government to pay for the ever shrinking share of governmental revenues dedicated to things like defense and other discretionary expenses that the politicians like to fight over. It is the growth of transfer payments and not the shrinking share of revenue dedicated to general federal government operations, that appears at first to be a potentially serious problem.

        Three of the largest components of the transfer payment or non-discretionary portion of the federal budget are, Social Security disbursements, transfers to state and local governments and various costs associated with health care.

        Since 1970, US real GDP has grown a little more than three times more than it was then. Social Security payments, perhaps the largest component of transfer payments during this same time have increased more or less by the same amount [meaning its percentage of GDP has remained relatively stable].

        Transfers to state and local governments on the other hand have exploded from almost nothing in 1965 to become, next to SS and Defense, the largest component of federal spending not included in the discretionary portion of the budget.

        A major source of this huge growth occurred when the Nixon and Reagan Administration packaged many existing federal programs [such as housing and many welfare programs] into automatic transfers of tax revenues back to the states and local governments [this is partially why the poorly run State governments, primarily in the South, receive so much more federal revenue than they contribute in taxes]. This effectively put that money outside of the budget cutting debate, because no elected official likes to cut money received by his state; entitlements, if you will, that allow the state to balance its budget without raising taxes. [That Democrats went along with this dodge to fund state governments from federal revenue, further cements their reputation as the wuss party.]

        The last major component of the non-discretionary spending that has grown significantly has been in health care. Independent of the issue of who is covered to receive health care and who is not, it is attempts to control these costs that comprise a major goal of Obamacare. It is these cost control provisions and not the coverage provisions that those who can afford to directly oppose the program really most object to. Recall that the medicare drug program passed by the Bush administration was a direct redistribution of taxpayer funds to the drug industry without any cost controls. Obamacare thanks to the efforts of both Republican and Democratic legislators ended some of the most egregious aspects of that legislation.

        Republicans are especially hesitant to curtail or eliminate transfer payments to their states [after all this was a tremendous victory for political expediency over policy]. Democrats feel the same way about Social Security. They both, until Obamacare came along, have been reluctant to take on the Health Services industry.

******

Today's Quotes:

 

"Even without being able to gauge the actual political power of wealthy citizens, we can confidently reject the view that extensive political power by the wealthy would be of little practical importance anyway because their policy preferences are much the same as everyone else’s. On many important issues the preferences of the wealthy appear to differ markedly from those of the general public. Thus, if policy makers do weigh citizens’ policy preferences differentially based on their income or wealth, the result will not only significantly violate democratic ideals of political equality, but will also affect the substantive contours of American public policy."
       
    Democracy and the Policy Preferences of Wealthy Americans, by Benjamin I. Page, Larry M. Bartels, and Jason Seawright
   
EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  There is no debt problem (6+ / 0-)

    This is something made up by Republican leaders after the previous Republican leaders said that "Deficits don't matter."  It's the current talking point.

    Debt is a problem when it comes from money thrown away on wars and other forms of destruction.  Debt is a good thing when it comes from investments in health, education, the environment, science and infrastructure.

    We need more debt from the latter group and much less from the former, but there is no absolute debt problem.  Don't buy into that.

    "Trust only those who doubt" Lu Xun

    by LookingUp on Sun Aug 18, 2013 at 06:23:04 PM PDT

    •  Looking (2+ / 0-)
      Recommended by:
      pvasileff, LookingUp

      Thank you. What the post argues, perhaps not well, is that there is no "debt problem" (even if the the nature of debt is illusory) caused by current public discretionary expenditures. The failure of public revenues to cover public debt is to a great extent caused by non discretionary transfer payments inserted into the national public budget primarily at the request of Republican and conservative political leaders.  

  •  In order to be thorough when talking about the (0+ / 0-)

    Federal Govt's debt and deficit balance, one must always mention 2 things in order to provide context:
    1) US securities (the debt) are net financial assets for the non-Govt.  So if you want to "reduce the debt" you are really saying that the private sector should have less access to risk free interest bearing financial assets

    2) The deficit is really the net contribution of the federal Govt to the money supply of the private sector.  Spending = Income, therefore if you want to "shrink the deficit" you are saying that you think the Federal Govt should contribute less economic activity to the private economy.  National Accounting 101

    Now, I am not saying that its impossible to ever be in an economic situation where you wouldn't want to do either of these two things.  For example, during the private debt explosion during the Clinton surplus years, if the Federal Govt had continued to contribute a large deficit to our 3% employment, then we'd probably have seen some inflation.  However, huge private debt bubbles supporting full employment are very rare (1920's and and late 1990's and the 00's) and unsustainable, so most of the time a nice healthy Govt contribution (deficit) is necessary as a growing economy and population need a growing supply of money.  I am just saying if anyone who writes about the debt and deficit does not mention the above listed two facts, they are not telling the whole story.

    MMT

    "The Earth is my country and Science my religion" Christiaan Huygens.................... Please join our Kos group "Money and Public Purpose". The gold standard ended on August 15, 1971, its time we start acting like it.

    by Auburn Parks on Mon Aug 19, 2013 at 06:02:10 AM PDT

    •  Auburn (0+ / 0-)

      Thank you. Your comment is useful. But, the point of my post was not about debt in general or whether it is good bad or indifferent but that current federal revenues are more than adequate for discretionary expenditures. However, the ever-increasing portion of federal expenditures going to transfer payments to the states is what may contribute to causing the perception that there is a growing revenue shortfall caused by discretionary spending programs and individual entitlements.    

      •  Just helping to spread some information is all (0+ / 0-)

        P.S.  The Govt's budget is not like a household or business budget.  Since Congress is the currency issuer, its not revenue constrained.  Whether taxes are $1 trillion per year or $50 trillion, the Govt's ability to mark up or down computer entries at the Fed is unchanged.

        "The Earth is my country and Science my religion" Christiaan Huygens.................... Please join our Kos group "Money and Public Purpose". The gold standard ended on August 15, 1971, its time we start acting like it.

        by Auburn Parks on Tue Aug 20, 2013 at 05:07:02 AM PDT

        [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site